[2018 note - the contents of this article may be out of date as of the date you read this. We are in the process of updating the content. Please consult with your tax professional regarding any tax related questions you have. This article is not tax advice. Please do not rely on its content.]
One question that sometimes comes up for our attorneys is "are legal fees for divorce are tax deductible?"
While we refer all tax questions that come our way to the asking spouse's tax professional, we can generally tell you on this topic that the answer is no.
The legal fees you incur for a divorce case are not deductible. The IRS has said to consider such fees as being a personal expense to you that relates to your marital relationship and not a proper business or deductible expense.
There are however exceptions to the rule that legal fees for a divorce are not tax deductible.
Please speak with your tax professional for any questions or tax advice you may need after reading this article. Nothing contained in this article is intended nor shall it be construed as tax advice.
Legal fees to obtain or enforce spousal support in a divorce may be tax deductible.
Internal Revenue Code § 212 allows a U.S. federal income tax deduction for expenses that relate to investment activities. The IRS allows a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year" for the following:
(1) Production or collection of income, or
(2) Management, conservation, or maintenance of property held for the production of income or
(3) In connection with the determination, collection, or refund of any tax.
Legal fees incurred to obtain spousal support or to enforce it may be deductible pursuant to the first section that refers to the "production" or "collection" of income. The fees may also be deductible related to determination, collection or refund of any tax. This rule may apply if you are going through a divorce or if you have a post judgment matter. You should consult with your tax professional about such issues.
Like any complex exception, there is an exception to the exception. As a general rule, the spouse that actually incurs and pays the legal fees is the one that can deduct it. Does that mean if you pay the legal fees of your spouse, even if it is related to spousal support, you cannot deduct it? The answer may be yes, you cannot deduct it, unless you and your spouse file a joint tax return. This rule may even apply if the court orders you to pay your spouse's fees.
Remember that our attorneys are not tax lawyers. We do not give tax advice to clients and nothing contained in this article should be construed as tax advice.
When you speak to your tax professional, whether that is a CPA or tax attorney, you should mention that you have incurred attorneys fees in connection with the divorce and ask your tax professional whether or not any of the fees that you incurred are tax-deductible. Remember that tax laws are constantly changing so ensure you speak to your tax professional about tax deduction and legal fees on a regular basis. If you have spousal support as part of your case and you have incurred fees related to it, you may be entitled to a tax deduction.
Do you have divorce case that involves spousal support?
Do you need the help of experienced divorce attorneys? We are here for you and ready to help. Contact us for a consultation.